Relief from sanctions refused for breach of unless order

The Court of Appeal this month considered the issue of relief from sanctions following the breach of an unless order, and in doing so applied the guidance given in Mitchell and the three stage test subsequently set out in Denton. Andrew Cousins looks at the decision and highlights the practice points arising from it.

Select tags below to skip to the relevant section

Background

The claimant brought a claim for an unpaid debt for the supply of electricity. Proceedings were initiated in February 2013 and various directions were made by district judges in the course of the proceedings. The issue in this case revolved around the filing of the listing questionnaire:

5 November 2013: an order was made requiring both parties to file listing questionnaires by 3 February 2014.

10 February 2014: with no listing questionnaire having been filed on behalf of the defendant, the court made an ‘unless order’ stating that unless the defendant filed the listing questionnaire by 19 February the defence would be struck out without further order of the court.

18 February 2014: a trainee solicitor from the defendant’s solicitors filed a directions questionnaire, and not a listing questionnaire.

20 February 2014: the court notified the defendant's solicitors that it had received the directions questionnaire and pointed out that was not the document required and that in fact the listing questionnaire was still awaited.

21 February 2014: the defendant filed the listing questionnaire at court.

25 February 2014: the claimant applied for judgment in default of a defence (on the basis that the defence had been automatically struck out pursuant to the unless order).

27 February 2014: the defendant’s solicitors wrote to the court apologising for the mistake and simply asking the court not to grant the sanction requested by the claimant.

18 March 2014: judgment in default was granted in the sum of £211,388.61.

21 March 2014: the defendant's solicitors applied to the court for relief from sanction.

At first instance the court granted relief and set aside the default judgment. The claimant appealed the first instance decision to the High Court and the appeal was allowed so that the default judgment was restored. The defendant appealed to the Court of Appeal.

Court of Appeal findings

Jackson LJ, King LJ and Lindblom LJ dismissed the appeal with Jackson LJ giving the lead judgment. The court looked at the guidance in Mitchell v News Group Newspapers Ltd (2013)CA and the three stage test set out in the subsequent decision in Denton v TH White Ltd (2014)CA and considered the seriousness of the breach, whether there was a good reason for the breach and the overall circumstances of the case.

Seriousness of the breach

In this case the central issue relevant to this question was whether the breach of the unless order should be considered in isolation, or whether it should also take account of the fact that the defendant had three months to file its listing questionnaire and was late in doing so.

The lower courts had reached differing views on this point but the Court of Appeal considered that an unless order does not stand on its own. A party who fails to comply with an unless order is normally in breach of an original order or rule as well as the unless order. Accordingly, it was not possible to look at the unless order in isolation and the court had to look at the underlying breach. The phrase "the very breach" in paragraph 27 of the judgment in Denton, when applied to an unless order, meant the failure to carry out the obligation which was firstly imposed by the original order and secondly extended by the unless order. The fact that a party had failed to comply with an unless order indicated a serious and significant breach. Examining the chronology of the case the defendant's breach was serious and significant.

Good reason for the default

The second stage of the court’s task was to consider whether there was a good reason for the default. The explanation offered by the defendant was that the wife of the solicitor with conduct of the matter had been suffering ill health. However these health problems had been known for many months, and the defendant solicitors’ firm was of a significant size, with over 40 solicitors, and could be expected to have provided appropriate cover for the solicitor during his absence. Accordingly the reason for the default was not a good reason.

The overall circumstances of the case

Here the promptness of the application for relief from sanctions was a relevant, as had been stressed both in Mitchell and in Durrant v Chief Constable of Avon and Somerset (2013) CA. If the defendant had made an immediate application for relief at the same time as filing its listing questionnaire, or very soon after, the court would have been strongly inclined to grant relief from the sanction of striking out. The defendant's lack of promptness in applying for relief was crucial. When that delay was added to all the other factors, it could be seen that the defendant's default had substantially disrupted the progress of the action.

Comment

The judgment is an important reminder to the parties that having a considerable period of time to comply with directions, breaching them, and then delaying in applying for relief from sanctions will not endear the court to granting retrospective relief from sanctions.

The breach of an unless order is not formally categorised as a ‘serious and significant’ breach but this judgment does appear to confirm that breach of an unless order will usually mean that the party seeking relief is likely to fail the first limb of the test for relief from sanctions.

In Mitchell, it was accepted by the Court of Appeal that the debilitating illness of a party of their solicitor may, depending on the circumstances, constitute ‘good reason’ to allow relief from sanctions, and the defendant’s solicitors presumably had that in mind when reference was made to the ill health of the conducting solicitor’s wife. However, the argument did not succeed, and while there is the distinction here of the illness not being that of the solicitor personally, the question also arises as to whether there will be less forgiveness in the bigger law firms with their greater resources.

For larger firms with many legal advisers the judgment may therefore be a stark warning that work should be capable of reallocation with cover provided in the absence of a legal adviser. This will cause concern to partners and line managers who will need to be acutely aware of any absences in their teams and plan cover appropriately to ensure compliance with directions, as the explanation of an illness will not satisfy the court that a good reason has been given such as to satisfy the second limb of the test for relief from sanctions.

The court’s final comments though are something that should come as no surprise to litigants in the ‘post Jackson world’, any delay in applying for relief will be viewed very harshly and if a party finds itself in breach of an order and in need of relief then they should not delay at all in making their application. Such a delay will weigh heavily against the applying party when the court considers the final stage of the test for relief and could prove fatal to the application.

Yesterday saw the amendments made to the Civil Liability Bill in the House of Commons agreed to by the House of Lords so that it has now completed its parliamentary process and awaits Royal Assent. It…

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.